ECON-711
Macro Political Economy
American University
Department of Economics
Spring 2009
Time: Tues. 5:30-8:00 p.m.
Room: McKinley 101
Prof. Robert A. Blecker
Office: Roper 105/109
Phone: 202-885-3767
E-mail: blecker@american.edu
Office Hours: Tues. & Weds. 2-5 pm
Syllabus
This course will cover alternative theories of long-run economic growth, technological
change, and income distribution, including classical-Marxian, neo-Keynesian, and modern neoclassical models, as well as short-run macro models in the structuralist, neo-Kaleckian, and postKeynesian traditions. This is an advanced doctoral theory course, which is required for either the
advanced macroeconomics or advanced heterodox economics track in the Ph.D. program (and
the corresponding comprehensive exams). It may also be taken as the “extra” theory course for
students in the advanced microeconomics track. The prerequisites are ECON-702 and 705,
which may be waived only with permission of the professor.
Class Website
The class website is on Blackboard (http://blackboard.american.edu). It will contain this
syllabus (and any updates) plus announcements, assignments, and other useful information (e.g.,
links to some required readings and related websites). The website will also be used for sending
e-mail messages to class participants; I will use this feature extensively for making announcements. By default, Blackboard sends e-mail to your @student.american.edu address; you can
change your e-mail address under your personal settings in Blackboard, or use my.american.edu
to have your AU e-mail forwarded to another address. It is your responsibility to configure
and check your e-mail so that you receive messages about this course in a timely fashion.
Books and References
The following four books have been ordered at the Campus Store (ISBN numbers are
provided for those of you ordering them elsewhere to make sure you get the right books):
Duncan K. Foley & Thomas R. Michl, Growth and Distribution, Harvard University Press, 1999.
ISBN10: 0-674-36420-1
Philippe Aghion & Peter Howitt, The Economics of Growth, MIT Press, 2009. ISBN13: 978-0262-01263-8 [Note: This replaces a different book that was ordered earlier.]
Hyman Minsky, Stabilizing an Unstable Economy, McGraw-Hill, 2008 (reprint of 1986 book
with new Foreword by Henry Kaufman and update by D. Papadimitriou & L. R. Wray).
ISBN13: 978-0-07-159299-4 [Note: an older edition may be placed on reserve]
Eckhard Hein, Money, Distribution Conflict and Capital Accumulation: Contributions to
‘Monetary Analysis’, Palgrave Macmillan, 2008. ISBN13: 978-0-230-52157-5
1
In addition, the following other books will also be placed on reserve at the library:
Johan Deprez & John T. Harvey (editors), Foundations of International Economics: Post
Keynesian Perspectives, Routledge, 1999.
Amitava K. Dutt, Growth, Distribution, and Uneven Development, Cambridge University Press,
1990.
Gary A. Dymski et al. (editors), Transforming the U.S. Financial System, M. E. Sharpe, Inc.,
Economic Policy Institute Series,1993.
Gerald A. Epstein & Herbert M. Gintis (editors), Macroeconomic Policy After the Conservative
Era, Cambridge Univ. Press, 1995.
Wynne Godley & Marc Lavoie, Monetary Economics: An Integrated Approach to Credit,
Money, Income, Production, and Wealth, Palgrave Macmillan, 2007.
Marc Lavoie, Foundations of Post Keynesian Analysis, Edward Elgar, 1992.
J. S. L. McCombie & A. P. Thirlwall (editors), Essays on Balance of Payments Constrained
Growth: Theory and Evidence, Routledge, 2004.
Fred Moseley & Edward N. Wolff (Eds), International Perspectives on Profitability and
Accumulation, Edward Elgar, 1992.
Robert Pollin (editor), The Macroeconomics of Saving, Investment, and Finance, Univ. of
Michigan Press, 1997.
Mark Setterfield (editor), The Economics of Demand-Led Growth: Challenging the Supply-Side
Vision of the Long Run, Edward Elgar, 2002.
Engelbert Stockhammer, The Rise of Unemployment in Europe: A Keynesian Approach, Edward
Elgar, 2004.
Lance Taylor, Reconstructing Macroeconomics: Structuralist Proposals and Critiques of the
Mainstream, Harvard University Press, 2004.
Work Assignments
•
•
•
•
Take-home Midterm Exam (due in early March); 30% of grade
One critical review of an empirical article (due in late April); 20% of grade
In-class Final Exam, May 5 (No exceptions); 40% of grade.
Additional problem sets and review questions will be distributed. Some (not all) of these will
be graded for effort and completeness (10% of grade).
Reading List
Abbreviations for frequently cited journals:
AER
American Economic Review
CJE
Cambridge Journal of Economics
IRAE
International Review of Applied Economics
JPKE
Journal of Post Keynesian Economics
RRPE
Review of Radical Political Economics
+Denotes empirical study
*Denotes minimum required readings (all of these should be available either in a required book,
a book on reserve (R), a Blackboard E-reserve (E), or a Blackboard Course Document (D).
NOTE: Required readings are subject to change.
2
Part I – Long-Run Growth: Alternative Perspectives
1. Classical and Neo-Marxian Models: Income Distribution and Technological Change
*Foley & Michl, Growth and Distribution, chaps. 1-7 [11-12 are optional].
*+Edward N. Wolff, “What’s Behind the Rise in Profitability in the US in the 1980s and
1990s?” CJE, vol. 27 (July 2003), pp. 479-99. E
+Simon Mohun and Roberto Veneziani, “Goodwin Cycles and the U.S. Economy, 19482004,” working paper, Queen Mary University of London, April 2007. D
+Simon Mohun, “Distributive Shares in the US Economy, 1964-2001,” CJE, vol. 30, no. 3
(May 2006), pp. 347-70.
Amitava K. Dutt, Growth, Distribution, and Uneven Development, chaps. 2-3, 5-6. R
Donald J. Harris, “Accumulation of Capital and the Rate of Profit in Marxian Theory,” CJE,
vol. 7 (Sept. 1983), pp. 311-30. D
2. Neo-Keynesian Models: Aggregate Demand Constraints in the Long Run
A. Closed economy models
*Foley & Michl, Growth and Distribution, chap. 10.
*Amitava Krishna Dutt, “Aggregate Demand, Aggregate Supply and Economic Growth,”
IRAE, vol. 30, no. 3 (July 2006), pp. 319-36. E
*Mark Roberts, “The Conditional Convergence Properties of Simple Kaldorian Growth
Models,” IRAE, Vol. 21, no. 5 (December 2007), pp. 619 - 632. E
and/or
*John S. L. McCombie & Mark Roberts, “Effective-Demand-Constrained Growth in a TwoSector Kaldorian model, JPKE, vol. 31, no. 1 (Fall 2008), pp. 57-78. E
Amit Bhaduri, “Endogenous Economic Growth: A New Approach,” CJE, vol. 30, no. 1
(January 2006), pp. 69-83.
J. S. Metcalfe, J. Foster, & R. Ramlogan, “Adaptive Economic Growth,” CJE, vol. 30, no. 1
(January 2006), pp. 7-32.
Stephen A. Marglin, “Growth, Distribution and Inflation: A Centennial Synthesis,” CJE, vol.
8, no. 2 (June 1984), pp. 115-44.
Amitava K. Dutt, “Alternative Closures Again: A Comment on ‘Growth, Distribution and
Inflation,’” CJE, vol. 11, no. 1 (March 1987), pp. 75-82.
B. Open Economy Models (export-led growth and balance-of-payments constraints)
J. S. L. McCombie & A. P. Thirlwall (editors), Essays on Balance of Payments Constrained
Growth (2004), chapters 1-2, 6, 11. R [Note: these are reprinted articles by A. P. Thirlwall, R. A. Blecker, and J. A. Alonso & C. Garcimartín; the originals are on-line (D/E)]
M. Setterfield (ed.), The Economics of Demand-Led Growth, chapter 5 (Setterfield & Cornwall). R
+Miguel A. León-Ledesma, “Accumulation, Innovation and Catching-Up: An Extended
Cumulative Growth Model,” CJE, vol. 26, no. 2 (March 2002), pp. 201-16. E
+A. Razmi, “Balance-of-Payments-Constrained Growth Model: The Case of India,” JPKE,
vol. 27, no. 4 (Summer 2005), pp. 655-87.
3
+R. Blecker & A. Razmi, “The Fallacy of Composition and Contractionary Devaluations:
Output Effects of Real Exchange Rate Shocks in Semi-Industrialised Countries,” CJE,
vol. 32, no. 1 (January 2008), pp. 83-109.
3. Neoclassical Growth Models: The New Growth Theory and Critical Perspectives
*Foley & Michl, Growth and Distribution, chaps. 8-9, 13.
*Aghion & Howitt, Economics of Growth, chaps. 1-10.
Daron Acemoglu, Introduction to Modern Economic Growth, Princeton University Press,
2009. [more advanced text with state-of-the-art math]
*J. S. L. McCombie, “The Solow Residual, Technical Change, and Aggregate Production
Functions,” JPKE, vol. 23, no. 2 (Winter 2000-1), pp. 267-97. E
+J. Felipe & John McCombie, “The Tyranny of the Identity: Growth Accounting Revisited,”
IRAE, vol. 20, no. 3 (July 2006), pp. 283-99.
Paul M. Romer, “Endogenous Technological Change,” Journal of Political Economy, vol. 98
(1990), pp. S71-102 [note “S” means supplement issue].
+Thomas R. Michl, “Biased Technical Change and the Aggregate Production Function,”
International Review of Applied Economics, vol. 13, no. 2 (May 1999), pp. 193-206.
Robert J. Barro and Xavier Sala-I-Martin, Economic Growth (2nd edition, 2004).
Part II – Short-Run Macro: Inflation, Distribution, and Financial
Instability
1. Methodology, Perspectives, and Critiques
*E. Hein, Money, Distribution Conflict, and Capital Accumulation, Part I (chaps. 1-7).
*H. Minsky, Stabilizing an Unstable Economy, chaps. 1, 5-6.
*Steven M. Fazzari, Piero Ferri, and Edward Greenberg, “Aggregate Demand and Firm
Behavior: A New Perspective on Keynesian Microfoundations,” JPKE, vol. 20, no. 4
(Summer 1998), pp. 527-58. E
2. Mark-up Pricing, Profitability, Investment, Effective Demand, and Conflict Inflation
*R. Blecker, “Lecture Notes on Neo-Kaleckian Macro Models.” (class handout) D
*R. Blecker, “Demand, Distribution and Growth in Neo-Kaleckian Macro Models,” chap. 8
in M. Setterfield (ed.), The Economics of Demand-Led Growth. R
*H. Minksy, Stabilizing an Unstable Economy, chap. 7-8, 11.
*Lance Taylor, Reconstructing Macroeconomics, chaps. 4-5, 7. R or
*Marc Lavoie, Foundations of Post-Keynesian Economic Analysis, chap. 6-7. R
Amitava K. Dutt, “Stagnation, Income Distribution and Monopoly Power,” CJE, vol. 8
(March 1984), pp. 25-40.
Lance Taylor, “A Stagnationist Model of Economic Growth,” CJE, vol. 9 (December 1985),
pp. 383-403.
Peter Skott, “Effective Demand, Class Struggle and Cyclical Growth,” International Economic Review, vol. 30 (February 1989), pp. 231-47.
4
Robert A. Blecker, “International Competition, Income Distribution, and Economic Growth,”
CJE, vol. 13 (September 1989), pp. 395-412.
Stephen A. Marglin and Amit Bhaduri, “Profit Squeeze and Keynesian Theory,” chap. 4 in S.
A. Marglin & J. B. Schor, eds. The Golden Age of Capitalism (1990).
Amit Bhaduri and Stephen A. Marglin, “Unemployment and the Real Wage: The Economic
Basis for Contesting Political Ideologies,” CJE, vol. 14 (December 1990), pp. 375-93.
+Samuel Bowles and Robert Boyer, “Wages, Aggregate Demand, and Employment in an
Open Economy: An Empirical Investigation,” chap. 5 in G. Epstein and H. Gintis, eds.,
Macroeconomic Policy After the Conservative Era (1995). R
Marc Lavoie, “Traverse, Hysteresis, and Normal Rates of Capacity Utilization in Kaleckian
Models of Growth and Distribution,” RRPE, vol. 28, no. 4 (Dec. 1996), pp. 113-47.
R. Blecker, “Kaleckian Macro Models for Open Economies,” in J. Deprez & J. Harvey, eds.,
Foundations of International Economics: Post Keynesian Perspectives (1999), pp. 11649. R
Jose Antonio Cordero, “A Model of Growth and Conflict Inflation for a Small Open Economy,” Metroeconomica, vol. 53, no. 3 (2002), pp. 261-89.
Philip Arestis & Malcolm Sawyer, “Aggregate Demand, Conflict and Capacity in the Inflationary Process,” CJE, vol. 29, no. 6 (November 2005), pp. 959-74.
3. Money, Interest Rates, Unemployment, and Financial Instability
*Hyman Minsky, Stabilizing an Unstable Economy, chaps. 2-4, 9-10, 12-13.
*E. Hein, Money, Distribution Conflict, and Capital Accumulation, Parts II-III (chaps. 8-18).
Lance Taylor, Reconstructing Macroeconomics, chaps. 1, 3, 6, 8-9. R
Eckhard Hein, “Interest, Debt and Capital Accumulation—A Kaleckian Approach, IRAE,
vol. 20, no. 3 (July 2006), pp. 337-52.
Sébastien Charles, “Corporate debt, variable retention rate and the appearance of financial
fragility,” CJE, vol. 32, no. 5 (September 2008), pp. 781-95.
Peter Skott & Soon Ryoo, “Macroeconomic implications of financialisation,” CJE, vol. 32,
no. 6 (November 2008), pp. 827-62.
Wynne Godley & Marc Lavoie, Monetary Economics: An Integrated Approach to Credit,
Money, Income, Production, and Wealth, Palgrave Macmillan, 2007. R
Claudio H. Dos Santos & Gennaro Zezza, “A Simplified ‘Benchmark’ Stock-flow Consistent
(SFC) Post-Keynesian Growth Model,” Levy Institute Working Paper No. 503 (2007).
Mark Setterfield, “Is Inflation Targeting Compatible with Post Keynesian Economics?”
JPKE, vol. 28, no. 4 (Summer 2006), pp. 653-671.
G. Akerlof, W. Dickens, and G. Perry, “Near-Rational Wage and Price Setting and the LongRun Phillips Curve,” Brookings Papers on Economic Activity, 1:2000, pp. 1-60.
Engelbert Stockhammer, “Is the NAIRU Theory a Monetarist, New Keynesian, Post Keynesian or a Marxist Theory?” unpublished manuscript, Wirtschaftsuniversität Wien, 2007. D
Thomas R. Michl, “Tinbergen Rules the Taylor Rule,” Eastern Economic Journal, vol. 34,
no. 3 (Summer 2008), pp. 293-309.
+Mark Setterfield and Kristen Leblond, “The Phillips Curve and U.S. Macroeconomic Performance During the 1990s,” IRAE, vol. 17, no. 4 (October 2003), pp. 361-376.
+Mark Setterfield and Ted Lovejoy. “Aspirations, Bargaining Power, and Macroeconomic
Performance,” JPKE, vol. 29, no. 1 (2006), pp. 117-148.
5
Addendum: Studies of Investment, Saving, Consumption, and the Current Account
(extra empirical articles for review essays—more may be added)
+Steven M. Fazzari, R. Glen Hubbard, and Bruce C. Petersen. “Financing Constraints and
Corporate Investment,” Brookings Papers on Economic Activity, 1:1988, pp. 141-95.
+J. R. Crotty & J. P. Goldstein, “A Marxian-Keynesian theory of investment demand:
empirical evidence,” in F. Moseley & E. N. Wolff (Eds), International Perspectives on
Profitability and Accumulation, pp. 197-234 (Aldershot: Edward Elgar, 1992). R
+Steven M. Fazzari, “Monetary Policy, Financial Structure, and Investment,” chap. 3 in G.
A. Dymski, et al., eds., Transforming the U.S. Financial System (1993). R
+R. S. Chirinko & H. Schaller,“Why does liquidity matter in investment equations?” Journal
of Money, Credit and Banking, vol. 27, no. 2 (1995), pp. 527-548.
+Paula R. Worthington,“Investment, cash flow, and sunk costs,” Journal of Industrial Economics, vol. 43, no. 1 (1995), pp. 49-61.
+Chirinko, R. S., Fazzari, S. M. & Meyer, A. P. (1999) “How responsive is business capital
formation to its user cost?” Journal of Public Economics, vol. 74, pp. 53-80.
+Engelbert Stockhammer, “Financialization and the Slowdown of Accumulation,” CJE, vol.
28, no. 5 (September 2004), pp. 719-41.
+Lavoie, M., Rodriguez, G. & Seccareccia, M. “Similitudes and Discrepancies in PostKeynesian and Marxist Theories of Investment,” IRAE, vol. 18, no. 2 (2004), pp. 127-49.
+Robert A. Blecker, “The Economic Consequences of Dollar Appreciation for U.S.
Manufacturing Investment,” IRAE, vol. 21, no. 4 (September 2007), pp. 491-517.
+Özgür Orhangazi, “Financialisation and capital accumulation in the non-financial corporate
sector: A theoretical and empirical investigation on the US economy, 1973-2003,” CJE,
vol. 32, no. 6 (November 2008), pp. 863-86.
+Stephen P. Zeldes, “Consumption and Liquidity Constraints: An Empirical Investigation,”
Journal of Political Economy, vol. 97, no. 2 (1989), pp. 305-46.
+Christopher D. Carroll, “Why Do the Rich Save So Much?” in J. B. Slemrod, ed., Does
Atlas Shrug? The Economic Consequences of Taxing the Rich, Harvard/Russell Sage,
2000, chap. 14.
+Karen E. Dynan, Jonathan S. Skinner, and Stephen P. Zeldes, “Do the Rich Save More?”
Journal of Political Economy, vol. 112, no. 2 (2004): 397-444.
+David M. Gordon, “Must We Save Our Way Out of Stagnation? The Investment-Savings
Relationship Revisited,” chap. 3 in Robert Pollin, ed., The Macroeconomics of Saving,
Investment, and Finance (1997), pp. 95-159. R
+David M. Gordon, “Putting the Horse (Back) Before the Cart: Disentangling the Macro
Relationship Between Investment and Saving,” chap. 3 in G. Epstein and H. Gintis, eds.,
Macroeconomic Policy After the Conservative Era (1995), pp. 57-108. R
+Robert A. Blecker, “Policy Implications of the International Saving-Investment Correlation,” in Robert Pollin, ed., The Macroeconomics of Saving, Investment, and Finance
(1997), pp. 173-229. R
6